2017 Chinese Citric Acid Market Review: Marching to a High Profit Era

Ivy

2018-01-11

Introduction

In 2017, the citric acid market was prosperous. The price hovered at a high level in the first half of the year, and went down from the 3rd quarter until the end of the year. 2017 was the second year since the corn supply-side structural reform. As the main raw material of citric acid, the price of corn was much lower year on year before October 2017. As a result, the production cost of citric acid was kept low, giving higher profit margin for citric acid manufacturers. Citric Acid Manufacturers produced actively, and intended to increase operating rate. The overall operating rate in the citric acid market has reached the highest point in the recent years. Chinese citric acid has always relied heavily on export. However, as the government pushed environmental protection inspection in the recent years, citric acid has more and more been used in the daily chemical replacement and flue gas desulfuration. So the overall citric acid demand increased due to the boosting effect of domestic market. On the supply side, the citric acid production capacity was a bit excess. However, if the relationship among price, production and profit is well adjusted, the future of the citric acid industry is optimistic.

In summary, the citric acid industry has got rid of the state of deep loss, and is marching to a high profit era.

Market Analysis

In 2017, the average prices of citric acid monohydrate in Henan and Shanghai markets are as below:

From Jan 2017 to Aug 2017, the market price of citric acid remained at a high level.

1.Production Cost:

In January and February, the corn market operated softly. As 2017 was the second year since the corn supply-side structural reform, the sufficient supply led to a decrease in the price of corn, giving higher profit margin to citric acid manufacturers. From March, the supply of corn became tight. Some manufacturers raised the purchasing price of corn, providing good cost support. The situation lasted until August. Some spring corn came to the market, and corn inventory was higher, so the cost support for citric acid became weaker. However, it did not influence the price of citric acid much.

2.Supply:

In January, as the operating rate was low in the previous period, the supply of citric acid lagged behind the demand. Since February, factories increased the operating rate, reaching the highest point in years. In May, influenced by environmental protection pressure and the tight supply of water, the overall operating rate went down a bit. One of the citric acid manufacturers Yunnan Raner Chemical Industry Co. Ltd was shuttered due to the environmental protection inspection in 2017, and the date when it can return to regular operations is not decided yet.

3.Demand:

In March, Food Ingredients China 2017 (FIC 2017) was held in Shanghai. The event had boosting effect for export of citric acid. In domestic market, from March, the purchasing volume from food and beverage factories increased a little bit. From July, less orders came from the export market. Coupled with less boosting effect from the domestic market, some factories accumulated a high inventory level, and the supply exceeded the demand.

4.Market Price:

Overall, from January to August 2017, the citric acid market price kept high. The reference prices of citric acid monohydrate were in the range of RMB 6,800-7,100/mt, up 30% year on year.

Phase Two (Sep 2017- Dec 2017)

From September to December 2017, the market price of citric acid kept dropping. From November, the price was lower year on year.

1.Production Cost:

As the new corn in North China came to the market, the supply of corn became sufficient. The market price of corn dropped, leading to a decrease in the cost of citric acid. The support of production cost for citric acid dropped substantially.

2.Supply:

Although the inventory level was still high in many citric acid factories, they kept the high operating rate. Supply was raised as a result. Some enterprises started to use new production units, which raised the supply further. So the supply exceeded the demand seriously. From September to the end of 2017, the negotiation focus of citric acid kept dropping.

3.Demand:

The foreign trade market entered the off-season. Coupled with less boosting effect from the domestic market, some factories had a severe overstock. The supply exceeded the demand.

4.Market Price:

Overall, from September to December 2017, the market price of citric acid kept going down. The reference prices of citric acid monohydrate were in the range of RMB 5,600-6,600/mt, up year on year in September and October, and down year on year in November. The reference prices of citric acid anhydrous were in the range of RMB 6,200-7,225/mt. In September and October, the increase rate year on year was slightly lower than citric acid monohydrate, and in November, the price was lower year on year.

Export Analysis

In 2017, the citric acid export volume kept at a high level. Only in February, the export volume was lower than 80,000 MT. The overall export volume was higher than in 2016. The average price of citric acid in 2017 was also higher than in 2016. In November, the average price reached the highest at $1870/mt. The main export destinations included India, Japan, Turkey, Mexico and etc. The ones with the highest export volume were India, Japan and Turkey.

Weifang Ensign Industry Co., Ltd. is a world famous manufacturer of citric acid and the largest one in the world. The company was awarded “Citric Acid Characteristic Industrial Base Core Enterprise of China”. It is located in Chinese Sapphire City Changle. The Citric Acid Series products include Citric Acid Monohydrate, Citric Acid Anhydrous, Sodium Citrate, and other citrate products. These products are exported to more than 100 countries and regions. The production capacity of citric acid is 500-600 KT/a, which accounts for one-third of the world demand.

TTCA Co., Ltd

TTCA Co., Ltd is located in the beautiful Anqiu City in Shandong Peninsula with a total asset of RMB 2 billion. TTCA is only 120km away from the Port of Qingdao, 180km away from Jinan City, and 30km away from Weifang City. The transport is very convenient. TTCA factory covers an area of 600,000 square meters and owns garden-like plants, high qualified and trained staffs, and advanced production facilities. The series products include Citric Acid Monohydrate, Citric Acid Anhydrous, Sodium Citrate, Potassium Citrate, etc. The company’s total production capacity of citric acid is 250 KT/a. And its market share covers more than 120 countries and regions across the world. TTCA has become one of the largest professional Citric Acid manufacturers in the world, which ranks the second in Asia and top 3 in the world.

RZBC Group Co., Ltd

RZBC Group Co., Ltd. is located in Rizhao City of Shandong Province. With the vision of “keep global leading competitiveness in the industry”, RZBC always focuses on the research, production and sales of citric acid and citrates. The company’s total production capacity of citric acid is 250 KT/a, accounting for more than 23% of the capacity in China, and more than 13% of the capacity in the world. In the citric acid industry of China, even the world, RZBC has been a professional citric acid manufacturer, with leading technology, large capacity and good quality.

Yixing Xielian Biochemical Co. Ltd

Yixing Xielian Biochemical Co. Ltd is a Sino-Thai joint venture. It locates at “Chinese pottery city”Yixing. The company’s total production capacity of citric acid is 200 KT/a.

Laiwu Taihe Biochemical Co. Ltd

Laiwu Taihe Biochemical Co. Ltd is located in the High-tech Zone of Laiwu City, Shandong Province. The main products include citric acid monohydrate, citric acid anhydrous, sodium citrate, calcium citrate, and etc. The company is located in Shandong, the middle of the foot of Mount Tai, 100km away from Jinan International Airport, and 200km away from Qingdao Port. The Beijing-Shanghai high-speed road and Dragonhead high-speed road cover the whole region, forming a criss-cross road and rail transport network, which is extremely convenient. TAIHE is a member of CCCMC and China fermentation industry association. It has been certificated by ISO9001, ISO14001, ISO2000, HACCP, halal, kosher, IP, BRC, GMP. The company has a sound quality assurance and after-sales service system. The quality of the products is in accordance with the international standards of the European Pharmacopoeia, the British Royal Pharmacopoeia and United States Pharmacopoeia. "TAIHE" trademark has been registered in the EU-27. The company’s total production capacity of citric acid is 150 KT/a, export to more than 80 countries and regions.

COFCO Biochemical (AnHui) Co., Ltd.

COFCO Biochemical (AnHui) Co., Ltd. is one of the leading agricultural products processing enterprise in China. It locates in Bengbu, the so-called “Pearl City” along Huai River, with employees over 10, 000 people, and total assets at 7.2 billion RMB. The company’s total production capacity of citric acid is 150 KT/a, which accounts for 17% of world citric acid market. In order to expand the production capacity of citric acid, COFCO Biochemical set up a new plant in Yushu in Jilin Province, which may be piloted in the first half of 2018. Yushu is rich in agricultural resources, located at the world famous gold corn belt. The new plant is expected to have the production capacity of 150KT/a..

Summary

In 2017, corn market-oriented reform entered the second year. Low cost has brought a lot of profit for citric acid market. In the first half of 2017, the price of citric acid stayed at a high level. However, it started to decrease drastically in the 4th Quarter of the year. The situation of oversupply is hard to change in the near future. It is expected that the price of citric acid will keep low in the beginning of 2018.